Commercial Lease Agreements in Bangladesh: Key Terms Explained

A commercial lease agreement in Bangladesh governs far more money and risk than a typical flat rental. A shop in a busy Dhaka market, an office floor in Gulshan or Motijheel, a showroom on a main road in Chattogram or a warehouse near an industrial area can involve large position money (salami), a security deposit worth many months of rent, expensive fit-out by the tenant, and a relationship that lasts five or ten years. Yet many commercial tenancies still run on a two-page stamp paper deed copied from an old residential agreement, with vague clauses that both sides later interpret differently.

This guide explains the key terms of a commercial lease in plain English: parties and premises, term and lock-in, rent and escalation, deposit and salami, service charge and utilities, permitted use, fit-out, maintenance, subletting, termination, and the stamp duty and registration questions you should raise with a lawyer. It is written for shop, office, showroom and market owners as well as the businesses that rent from them.

Important: this is general information, not legal advice. Commercial tenancies are affected by several laws, including the Premises Rent Control Act 1991 (বাড়ি ভাড়া নিয়ন্ত্রণ আইন, ১৯৯১), the Contract Act 1872, the Transfer of Property Act 1882, the Stamp Act 1899 and the Registration Act 1908, as well as tax rules. Provisions and rates change; have your lease drafted or reviewed by a qualified lawyer and confirm tax points with a tax adviser or the NBR.

How a Commercial Lease Differs From a Residential Rental Agreement

1. Parties, Authority and the Premises

Name every party correctly. If the tenant is a company, use its registered name and address, and have the agreement signed by an authorised person, ideally with a board resolution or authorisation letter attached. If the landlord is several co-owners (common in family buildings), all owners or their authorised representative should sign, with proof of ownership such as title deed, mutation (namjari) and latest holding tax receipt.

Describe the premises precisely: building name, holding number, floor, shop or unit number, area in square feet (and whether it is carpet area or includes a share of common area), and any parking spaces, storage or signage rights included. Attach a floor plan if possible. Ambiguity about area leads directly to disputes about rent per square foot and service charge.

2. Term, Lock-in and Renewal

The term is the length of the lease, for example five years from 1 January 2027. Specify the commencement date and whether rent starts from that date or after a fit-out period.

A lock-in period is a minimum time during which neither side (or only the tenant) can end the lease without penalty. Landlords like it for income security; tenants accept it when they receive fit-out time or a fair rent.

A renewal clause sets out whether the tenant can renew, how much notice is needed, and how rent will be fixed for the new term (a fixed percentage increase, market review, or negotiation). Without it, every renewal becomes a fresh negotiation, often under pressure.

3. Rent, Payment Terms and Escalation

State the monthly rent in Taka, what it includes and excludes (service charge, utilities, VAT if applicable), the due date, the payment method (bank transfer is best for commercial tenants; receipts for every payment) and the consequences of late payment.

Escalation is how rent rises during the term. Common options are a fixed percentage every one, two or three years, or a fixed step schedule. Keep the formula simple and write an example into the lease.

For example (illustrative): a shop is leased for 6 years at Tk 40,000 per month, with a 10% increase every 2 years.

• Years 1–2: Tk 40,000 per month.
• Years 3–4: Tk 40,000 × 1.10 = Tk 44,000 per month.
• Years 5–6: Tk 44,000 × 1.10 = Tk 48,400 per month.

Total rent over 6 years: (Tk 40,000 + Tk 44,000 + Tk 48,400) × 24 months = Tk 1,32,400 × 24 = Tk 31,77,600. Writing this schedule into the lease removes any argument about how the increase is calculated. The Premises Rent Control Act 1991 contains provisions on standard rent and increases; check with a lawyer how they apply to your property. For more on structuring increases see commercial rent review and escalation.

4. Security Deposit, Advance and Salami

These three payments are often confused. Your lease should treat each separately:

• Security deposit (jamanat): held by the landlord against unpaid rent, bills or damage, and refundable at the end subject to deductions. State the amount, whether it earns any interest (usually not), and the timeline and conditions for refund.
• Advance rent: rent paid ahead and adjusted against future months. State exactly how much is adjusted each month and what happens to any unadjusted balance on early exit.
• Position money (salami): a one-time payment for the right to occupy a prime location, common in Bangladeshi markets. State whether it is refundable (fully, partly or not at all), whether it transfers if the tenant assigns the shop, and issue a proper receipt.

The Premises Rent Control Act 1991 contains rules about advance payments and premiums; unwritten or poorly documented salami is a frequent source of litigation. Our guide to advance rent and security deposit in Bangladesh explains the differences in more depth.

5. Service Charge and Utilities

In markets, malls and office towers, service charge can be a significant part of occupancy cost. The lease should state:

• The amount or the formula (for example per square foot per month).
• What it covers: common area cleaning, security guards, lifts and escalators, common electricity, generator, water pumps, CCTV, fire safety maintenance, and in malls perhaps marketing.
• How and how often it can be revised, and whether the tenant can see a summary of costs.
• How electricity, gas and water inside the unit are billed: separate meter in the tenant's name, or sub-meter billed by the landlord at a stated rate.
• Generator or backup power charges, if any, and how they are calculated.

6. Permitted Use, Licences and Compliance

The permitted use clause states exactly what business the tenant may run, for example "retail sale of footwear" or "corporate office". It protects the building's tenant mix and prevents uses that create nuisance, fire risk or extra load (such as a restaurant kitchen in a unit designed for an office).

The tenant should be responsible for obtaining and renewing its own trade licence and any sector licences, and for complying with laws applicable to its business. The landlord should confirm the premises can lawfully be used for the purpose, since building approvals and land use matter. Ask for copies of licences and keep them on file.

7. Fit-out, Maintenance and Safety

Fit-out, alterations and reinstatement

Commercial tenants usually invest in interiors. The lease should cover:

• Fit-out period: time given before rent starts, and whether it is rent-free or at reduced rent. Fit-out periods of a few weeks to a few months are commonly negotiated, depending on the size of the works.
• Approval of drawings: no structural changes, no drilling into beams or columns, no changes to fire exits or electrical load without written approval.
• Signage: size, location and who approves it; any additional charge for facade or rooftop signs.
• Ownership at exit: which fixtures the tenant may remove, which stay, and whether the tenant must restore the unit to its original condition (reinstatement).

Repairs and maintenance

Divide responsibilities clearly. A common split: the landlord maintains the structure, roof, external walls, main utility lines, lifts and common areas (often funded through service charge); the tenant maintains the interior, its own fit-out and equipment, and repairs damage caused by its staff or customers. State response expectations for urgent landlord repairs, since a leaking roof or failed power supply can stop a business.

Insurance, safety and liability

Fire risk is serious in Bangladeshi markets. The lease should require the tenant to follow fire safety rules, keep extinguishers where required, avoid storing hazardous goods and never block corridors or exits. Consider whether the landlord insures the building and the tenant insures its stock and fit-out. Include a clause about responsibility for loss or injury caused by each party's negligence. Keep safety obligations realistic and enforce them consistently.

8. Assignment, Subletting and Change of Control

In many markets, shops are informally "sold" from one trader to another with a new salami changing hands, while the landlord's records still show the original tenant. Prevent this with a clause that the tenant cannot assign, sublet, share or part with possession without the landlord's prior written consent. For companies, consider whether a change in ownership counts as an assignment. If you allow transfers, state the process and any transfer fee in writing.

9. Default, Termination and Notice

The lease should spell out:

• What counts as default: unpaid rent for a stated period, repeated late payment, illegal use, serious breach of rules.
• The notice the landlord must give and the time allowed to remedy the default.
• Tenant's rights to end early (after lock-in, with notice) and any early termination payment.
• Notice periods for non-renewal at the end of term.
• That any repossession will follow lawful process. Locking a shutter, cutting power or removing goods without legal process can create serious legal problems for a landlord.

For handling tenants who fall behind, see our guide to handling shop tenant defaults.

10. Stamp Duty, Registration and Tax Points

Lease deeds in Bangladesh are generally executed on non-judicial stamp paper, with stamp duty depending on the type of instrument, term and amounts involved. Leases of immovable property beyond a certain term generally need to be registered at the sub-registry office under the Registration Act 1908, and an unregistered lease that should have been registered may be weak evidence in court. Duty and registration fees change from time to time, so confirm the current requirements with a lawyer or the sub-registry before signing.

On tax, rental income is taxable in the landlord's hands under the Income Tax Act 2023, and certain tenants (such as companies and some organisations) may be required to deduct tax at source from rent. VAT may also apply to certain commercial rentals. Rates and thresholds change; check with a tax adviser or the NBR and write into the lease who handles any deduction and how certificates are provided. See our guide on withholding tax on rent in Bangladesh for background.

Commercial Lease Checklist Before Signing

• Ownership documents verified; all owners or their authorised representative signing.
• Tenant identity or company documents and authorisation checked.
• Premises, area and floor plan attached.
• Term, lock-in, renewal and escalation schedule written with a numeric example.
• Deposit, advance and salami each stated separately with refund rules.
• Service charge and utility billing method clear.
• Permitted use, licences, fit-out approval and reinstatement defined.
• Maintenance split, safety rules and insurance responsibilities stated.
• Assignment and subletting restricted.
• Default, notice, termination and lawful repossession process included.
• Stamp duty, registration and tax responsibilities confirmed with professionals.
• Signed by both parties and witnesses; each side keeps an original or certified copy.

Common Mistakes in Commercial Leases

• Using a residential template that ignores fit-out, permitted use and escalation.
• Mixing salami, deposit and advance into one figure with no refund rules.
• Vague escalation such as "rent will increase as per market", which invites conflict.
• No restriction on transfers, leaving the landlord unsure who actually occupies the shop.
• Skipping registration questions for long leases.
• Ignoring tax deduction clauses with corporate tenants, causing confusion over net rent received.
• Self-help eviction instead of lawful process when disputes arise.

Final Thoughts

A well-drafted commercial lease agreement protects both sides: the owner knows the income, deposits and rules; the tenant knows its costs, rights and exit options. Take time over the key terms above, get professional legal and tax advice for the final draft, and keep the signed agreement and all payment records safe for the full term.

Once the lease is signed, day-to-day administration still matters. Bariwala ERP (বাড়িওয়ালা ERP) can store agreements against each shop or office unit, generate monthly invoices with service charge and sub-meter electricity, track deposits, advances, payments and dues, and send SMS reminders, which makes it easier to follow the terms you agreed.